Analysis | Economics: towards a radical rethinking?

In the wake of the global financial crisis, many within the economics community are calling for a fundamental re-examination of their methods. But what does it mean to be a radical thinker in economics?

What does it mean to be a radical thinker within economics? The term “Radical” – originally meaning “from the root” or “essential” – came into political usage via the metaphor of “grass-roots” change, and also through speaking of “changing the essence” of a political system. In this context, a radical rethinking of economics starts with uprooting our concepts of what an economy is – that is, where the economic sphere starts and stops, and what kinds of agents and objects populate the economic realm.

Tony Lawson, the seminal philosopher of economics, describes this intellectual project as “social ontology”. Our priorities and moral values are deeply embedded within our ontology, since our ontology circumscribes what political demands on one another can be articulated and justified. Ontology is intimately intertwined with epistemology. In the context of social science, epistemology is an account of how we are to study the stuff of the social world, given our conception of what kind of stuff we expect to find.

The epistemology of an academic discipline is described by its methodology – and economics has often been described as a discipline that is “long on methods but short on content”. Yet the traditional methods of economics have proved unhelpful in understanding or remedying the content of the economic predicament we find ourselves in. In the wake of a global financial crisis, deep-seated trade imbalances, interminable recession, unemployment and income inequality, it is time to re-examine our methods.

The need for a radical rethinking of economics stems from two imperatives: firstly, a concern with intellectual diversity and honesty, and secondly, a concern with the political ramifications of economic discourse. Firstly, mainstream neoclassical economics since the 1960s is at risk of calcifying into an enterprise where intellectual rigidity is mistaken for intellectual rigour. Since falling in love with the crystalline mathematics of the physicists in the late 18th century, economists since Walras have sought to speak to one another in the language of rational optimisation, dynamic programming, and statistical inference.This lends a logical clarity to economic prose that can sit stiffly with the often ad-hoc assumptions and axioms used.

However, we as neoclassical economists are now as wedded to our mathematical formalism as Newton was to writing the Principia in Latin so that only the best minds would be able to read it. One often hears the refrain from economics departments that other social sciences are by necessity vague because they do not use formalism. Yet this is as much an admission of economists’ lack of philosophical precision in using language as it is a criticism of the tendency of other social sciences to spout academic waffle.

Make no mistake: I’m excited about mathematics. It is possible to describe complex interactions and system dynamics through mathematics in a way that other forms of language and visualisation cannot even approach. This is most true of the emerging fashionable field of complexity and network theory. However, we should not see the logical axiomatisation of social interactions as the only game in town. Different languages can express different ontologies with varying levels of ease; and some languages also imply particular ontologies. As Maslow writes in The Psychology of Science, “It is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” If all you have is game theory and Lagrangian functions, all economies look like rational individuals attempting to optimise through market transactions. Methods can be constraining as well as illuminating; this is why, in a period of turbulence, a discipline needs to diversify its methods.

The philosopher of science, Thomas Kuhn, writes in The Structure of Scientific Revolutions that there is no one scientific method that is continuous across historical scientific paradigms, but a plurality of methods and ontologies. Scientific revolutions occur when too many mysteries or contradictions accumulate for the old paradigm to explain away. At this point, there is a breaking of old research methods, a period of tumultuous debate, and a shift to a new set of tools. But in the stable periods of research between such revolutions, we are in the process of doing what Kuhn terms “normal science”. This means playing a game with pre-set rules: holding a common paradigm frees its members from having to continuously examine and argue for their fundamental premises. This enables us to simply produce first-order work without constant metaphysical soul-searching. There is little professional (or intellectual) incentive for normal scientists to question the fundamentals of their paradigm during the optimistic times of normal science.

We should not think of contemporary economics as a period of Kuhnian normal science. Small schools of novel economic thought are clamouring for attention in the places where neoclassical economics falls silent. Agent- and network-based modelling as well as complexity theory create new analogies between human and insect systems of organisation, and emphasise “emergence”, the way complex holistic phenomena arise from relatively simple individual interactions. On the European continent, Marxist, Austrian/Hayekian, and post-Keynesian schools survive; but do not find so much of a home in the UK or the US. There are those who would rather see economics as a rhetorical or poetic discourse, more akin to history or literary studies, rather than wear the Emperor’s clothes of predictive science. This is not an acceptable view within the neoclassical school. The tribe of the Econ, as Axel Leijonhufvud writes in his humorous anthropological pastiche, Life Among the Econ, have a “fierce attachment to their ancestral grounds”. However, this tends to be a fierce attachment to a modernist reframing of the history of economic thought, and starts with the general equilibrium mathematics of Walras, rather than the moral philosophy of Smith.

There is much going on under the surface: even neoclassical macroeconomics is toying with its traditional assumptions of forward-looking agents who are on average right about the economy; financial frictions are being explored and explained. What we need in order to accelerate this process of scientific revolution is economic thinkers who are willing to take intellectual and professional risks, and explore the uncharted territory that lies between paradigms.

As a paradigm changer, Amartya Sen is a particularly nuanced intellectual figure. He is an economist who has not only crafted some of the mathematical tools of welfare economics, but has also contributed to the philosophical critique of those very same tools. While he has made his career in formal proofs within social choice theory, he has also highlighted the need for a deeper understanding of optimising agents’ preferences and desires, and lambasted – in his “Rational Fools” paper – the simplistic reductionist psychology inherent in social choice theory. Furthermore, he has written extensively on the need for a fundamental rethinking of economic value away from utilitarianism and towards a more Aristotelian conception of capabilities (in Development as Freedom and Capability and Well-Being). In this regard, his collaboration with the philosopher Martha Nussbaum, is a fruitful example of interdisciplinary exchange.

This intellectual duality is simply the result of an honest exploration of the world we are presented with. We must forge our own tools for grappling with the world and, at the same time, reflect on the kind of world our tools of analysis reproduce. It is not easy to get both right at the same time, on the first try; which is why doing philosophy of science – of economics in particular – needs to be intimately tied to the practice of doing economics.

Secondly, economic discourse constructs the political boundaries of acceptable socio-economic power relations – relations between firms, the state, and citizens. We are told that governments have no alternative but to cut now and cut deeper. What we lack is a well-articulated set of economic narratives that can challenge the neoliberal tropes of austerity and fiscal rebalancing, or can use the crisis as a vehicle for critiquing the kinds of markets our governments and firms have constructed. How can David Cameron get away with arguments that no economist would agree with, such as the analogy that the economy is like a household that has been too loose with its spending?

The answer is that economics as an academic discipline has become divorced from economics as a public narrative that explains the world we find ourselves in. To address this disconnect we should look to new ways of imagining and expressing economics. We want accessible forms of economic education that bring the tools of economic critique into everyone’s hands. Only then will we have a democracy that is able to tackle economic issues. Furthermore, we can enrich the diversity of ideas within academic economics as it is currently practised, and embrace a pluralism of methodologies within the discipline. We need not only a marketplace of ideas, but a marketplace of marketplaces – an idea of the possible alternatives to the way we organise our economic interactions.

Rethinking Economics is a collaborative UK-based network of economic ‘re-thinkers’, composed of students, academics, imaginative citizens, writers, and activists. With the support of the Institute for New Economic Thinking (INET) and the New Economy Organisers’ Network (NEON), we are at the forefront of re-imagining economics for the real world.

We launch with a conference (starting today, Friday 28th, to Sunday 30th June), bringing together speakers from vastly divergent schools of economic thought. But more than this, we are bringing together young thinkers and students to show them that we do have the collective power and responsibility to rethink economics. We want to produce alternative curricula, home-made lectures for the masses, online re-education, new narratives and better economic metaphors. We’re looking for your ideas and your words.